Employment Rate Remains High Whilst Earning Growth Falters

The UK unemployment rate drops below the US as many stop actively looking for jobs

The UK labour market has plateaued, though there are a few tentative signs of weakening jobs growth, the Resolution Foundation said today in response to the latest ONS labour market statistics.

The employment rate has matched its record high of 74.5 per cent for the past four months. This means that the latest fall in unemployment has been driven by an unwelcome increase in economic inactivity. The more timely claimant count measure increased by 10,000 in October.

Real earnings growth – currently 1.7 per cent – has now been below the pre-crisis average of 2.2 per cent for the last 12 months.

“For all the political and economic upheaval over the last 12 months, it’s remarkable that the labour market has barely shifted at all. Employment has remained at an historic high, while real pay growth has failed to return to pre-crisis levels despite historically low inflation.

“However, with inflation set to rise sharply over the next year, this benign picture won’t last. The big question for 2017 is whether pay settlements respond to rising prices. It’s important they do, otherwise we could see a fresh pay squeeze by the end of the year.

“Today’s figures also highlight a few tentative signs of a weakening jobs market, with JSA claims and inactivity both rising. While these increases may well be reversed next month, there is a risk that they could continue to grow into next year.”